Catherine Liu on Liquidated : An Ethnography of Wall Street and Twilight of the Elites : America After Meritocracy

The Best and the Brightest: On Wall Street and Meritocracy

CHRISTOPHER HAYES BEGAN his career as a journalist at The Nation, where he covered labor issues. As the host of an MSNBC news program, “Up” with Chris Hayes, he has situated himself within the mainstream media as a new voice from the left, his earnest outrage providing a respectful moderate counterweight to the histrionics of the right-wing pundits and journalists on Fox and CNN. His new book, Twilight of the Elites: America After Meritocracy, written for a broad public, offers a general theory about a “Crisis of Authority” that, from Hayes’s point of view, plagues the American body politic. For Hayes, a pervasive and popular sense of suspicion and outrage characterizes attitudes on all sides of the political spectrum, but he finds our capacity for outrage, in and of itself, to be sufficient grounds for hope.

Hayes opens Twilight of the Elites with a portentous description of a society teetering on the brink of disaster:

The foundation of our shared life as Americans — where we worship, where we deposit our paycheck, the teams we root for, the people who do our business in Washington — seems to be cracking before our very eyes. In our idled panicked moments, we count down the seconds until it gives out.

Lest Hayes’s description of our contemporary situation appear hyperbolic, he’s careful to mitigate his own position, with hedges like the observation that, “America feels broken.” Let us accept the premise that it feels as if we are on a precipice, or at least on the cusp of a catastrophe. Hayes comes up with an unfelicitous formulation to describe the root cause of our foundering social life: “elite failure.” In fact, for Hayes, “[e]lite failure and the distrust it has spawned is [sic] the most powerful and least understood aspect of current politics and society.” Twilight of the Elites goes on to give us a panoramic view of the United States in order to help us get our brains around the enormity of our collective distrust: from the Federal Government’s handling of the damage done by Hurricane Katrina, to the Supreme Court decision during the 2000 Presidential election, to the Iraq quagmire, to the Catholic Church’s handling of sexual abuse, to the abuse of performance enhancing drugs by professional athletes.

Few will deny that the chasm between upper class elites — the now-proverbial one percent — and the rest of us has been growing at an alarming rate. According to Hayes,

extreme inequality of the kind we have produces its own particular kind of elite pathology: it makes elites less accountable, more prone to corruption and self-dealing, more status-obsessed and less empathic, more blinkered and removed from informational feedback crucial to effective decision-making. For this reason, extreme inequality produces elites who are less competent and more corrupt than a more egalitarian social order would.

This implies that we should support the building of a socially egalitarian society because it would “produce” more moral and more competent leaders in a more efficient manner. Hayes believes that meritocracy is a good idea that has failed: it has produced ineffective institutions and a corrupt and self-dealing elite, and our task is to correct these flaws. The outraged and upstanding citizens on both sides of the political spectrum must seize the opportunity presented by the present crisis of authority to come together in unprecedented ways in order to repair the systemic damage done by the flagrant deception, corruption, and cheating that has permeated almost every area of American life.

As the above précis should make clear, Hayes conceives of class struggle as a battle between two elites: on the one hand the professional managerial class and self-made businesspeople — who make six figures a year — and on the other the one percent, the ruling class, who make far more. He apparently finds the possibility of working class struggle through union membership and labor agitation unimaginable: in any case, he simply does not mention organized labor as a possible agent of social change. In this book, the working class barely makes an appearance, except as victims of downsizing and de-industrialization.

If our elites are so bad, Hayes contends, we can blame the American meritocracy. Hayes confesses to being a product of its stringent selective processes: he tested into Hunter High School in New York City, an institution that admits through a testing regime founded in the crucible of the mid-sixties a tiny sliver of the city’s best and brightest seventh graders; and in a thumbnail autobiography he uses his experience there to describe the lack of demographic diversity and the surfeit of intellectual condescension that marked his middle school and high school years. It is at Hunter that Hayes absorbs the “open-minded, self-assured cosmopolitanism that is the guiding ethos of the current American ruling class. I learned that the world is yours for the taking, that you can go anywhere, and with the right amount of cultural capital, do anything.” Hayes went on to do quite a bit, himself, with a B.A. in Philosophy from Brown University.

Hayes is a child of the meritocracy, but he’s relatively uninterested in its history, starting with the history of the word itself. Although he cites sociologist and Labour politican Michael Young’s The Rise of the Meritocracy (1958), he neglects to mention that Young coined the term as an intentionally monstrous neologism (combining the Latin “meritus” with the Greek “kratia”) for his social satire of Great Britain on the brink of a populist revolt in 2033. In a 2001 article for the Guardian, Young was dismayed by the general, unthinking adoption of the term by politicians like Labour Prime Minister Tony Blair:

So assured have the elite become that there is almost no block on the rewards they arrogate to themselves. The old restraints of the business world have been lifted and, as [The Rise of the Meritocracy] also predicted, all manner of new ways for people to feather their own nests have been invented and exploited […] Can anything be done about this more polarised meritocratic society? It would help if Mr. Blair would drop the word from his public vocabulary, or at least admit to the downside. It would help still more if he and Mr. Brown would mark their distance from the new meritocracy by increasing income taxes on the rich, and also by reviving more powerful local government as a way of involving local people and giving them a training for national politics.

“Meritocracy,” Young argues, is what happens when the Left gives up on political and social equality as an operative ideal and supports the business values of efficiency and incentivization instead.

Other critics, like Nicholas Lemann, author of The Big Test: The Secret History of the American Meritocracy (1999), have argued that the twentieth-century transformation of elite institutions of higher education into ranking and sorting mechanisms for the rational distribution of educational opportunity is an inherently flawed project. For Lemann,

The idea of opportunity for everyone has been woven deeply into the fabric of the Unites States from the very beginning. Universal opportunity has been a theme in American writing and fable and rhetoric at every point in our history […] What we call meritocracy in the United States is really a group of separate ideas that we’ve unconsciously and inelegantly pasted together. The first idea, and the most important one to the founders of the system was this — that there should be a national governing elite, chosen early in life on academic criteria and then elaborately trained at public expense on the assumption that its members would repay the investment in the form of public service. The second was that psychometrics should be a governing force in society — specifically that IQ tests are truly a measure of supreme human quality.

In arguments too complex to detail here, Lemann lays out the betrayal of these principles, as “meritocratically selected” graduates of elite universities rejected public service and entered the financial sector for personal enrichment.

Writers like Young and Lemann dare to suggest that meritocracy may not have been such a good — or even a viable — idea after all. Hayes’s theory of political activism, by contrast, relies on Bill Clinton’s soft focus populist coalition of ordinary people who have “‘worked hard and played by the rules.’” He can give flesh to an alliance of the outraged only by casting them as competent professionals who, if given a chance, can repair the institutions driven into the ground by our corrupt one percent. The title of Twilight of the Elites alludes to Nietzsche’s crepuscular idols, and while it is not clear whether he thinks their decline needs to be speeded along, as Nietzsche did, he clearly believes they have brought low our shared life and our moral standards.

While Hayes may not offer the most radical or rigorous critique of meritocracy, he at least suggests that we have to scrutinize its role in reinforcing the social order, and offers a novel way of political coalition-building in the face of so much “elite failure.” The one percent may be the ruling class, but they ignore the two to four percent at their peril. For Hayes, the Tea Party, the Netroots, and even Occupy Wall Street share a powerful sense of common outrage and they should be able to make common cause out of their shared “alienation from the system”:

To talk to members of MoveOn or Occupy Wall Street or the Tea Party is to see a system that has radicalized those who under normal circumstances should feel most represented. The activist ranks on both left and right are largely drawn from demographic groups whose concerns are the most reflected in our national political culture. And yet their chief complaint echoes that of the colonists: that those in power are irredeemably distant.

Because activists on both sides of the political spectrum draw their constituency from the upper middle class — “people with graduate school degrees, homes, second homes, kids in good colleges, and six-figure incomes” — Hayes hopes that the shared political outrage of the upper middle classes will bind Tea Partiers and the Netroots in a new coalition. He finds that their common grievance against “elite authority” will allow them to overcome ideological differences in order to find common political ground.

Hayes’s methodology in Twilight of the Elites is eclectic, mixing anecdote, autobiography, and light wonkery in order to offer up a portrait of American institutions roiled by scandal. While it is difficult, and perhaps impossible, to prove that contemporary elites are more abusive and rapacious than their historical predecessors, Hayes has seized an opportunity to scrutinize the formation of contemporary privilege and to dissect the culture of its corruption before a mass public that academics can only dream of reaching. Not surprisingly, Hayes pins his hopes on Craigslist and YouTube as sites of “Internet-facilitated cooperation.” Michael Young’s fictional populist uprising is entirely absent, as are unions — traditional sites of worker solidarity that may seem too backward for Hayes’s sophisticated world view. (The Chicago Teachers Union, for example, has stood up to corporate and government interests in its recent strike and its own leadership has come up through the ranks.)

A partial corrective to Hayes’s misplaced idealism can be found in one of his sources: Liquidated: An Ethnography of Wall Street (2009) by Karen Ho, a Professor of Anthropology at the University of Minnesota. The actual lives of our status-obsessed, high-IQ brandishing elites take center stage in Ho’s ethnography of Wall Street. A contribution to the fields of anthropology of finance and the ethnography of markets, Liquidated offers an “on the ground” analysis of the putatively meritocratic culture of finance. In doing so, she shows that the myth of meritocratic selection is one of the volatile isotopes that powers the new oligarchy’s most valued servants.

If Hayes is concerned with social and political distance as one of the great levers of popular outrage (he claims that ordinary people feel very far from centers of power, while journalists like Judith Miller of The New York Times got too close to it), Ho is very concerned about closing the distance between her research methodology and her objects of study. She gets close to Wall Street and the center of global financial life by doing hundreds of interviews and, most, importantly by getting a job at Bankers Trust in order to be able to incorporate participant observation into her project. Hayes relies on Ho’s ethnography to produce another one of his “Post-It-Note” diagnoses of our present malaise when he argues that we have all entered “the Cult of Smartness” produced by the meritocracy: “Ironically, in seeking to stand apart, the Cult of Smartness can kill independent thought by subtly training people to defer to others whom one should ‘take seriously.’”

But if the Cult of Smartness can kill independent thought, can’t it also encourage it? How is it different from the much feared corporate “groupthink” of the 1960s? Hayes’s work is laudable in its attempt to relate steroid abuse in professional baseball to the the failures of FEMA, but the sheer scope of his argument has made it impossible for him to capture the details and nuance of the academic work that he cites. This may be a generic problem with the marketing and packaging of a book by a television personality, but we can still wish for something better, or at least more considered.

Ho’s ethnography of Wall Street provides exactly that. She demonstrates that the not-so-subtle deference of would-be independent thinkers has produced a fantasmatic notion of the market, comprised of a starkly reconfigured relationship between shareholder value, corporate responsibility and the public good. Living in New Jersey during the 1995 breakup of AT&T, Ho was dismayed by the scale of the “downsizing-induced worker trauma” that ensued. Unemployed workers and soaring stock prices created a jarring image of American economic life. “While the desire for profit accumulation is certainly not new,” she writes,

what is clearly unique in the recent history of capitalism is the complete divorce of what is perceived as the best interests of the corporation from the interests of most employees. Only twenty-five years go, the public corporation in the United States was mainly viewed as a stable social institution […] judged according to a longer-term time frame that went beyond Wall Street’s short term financial expectations.

Thus Ho begins to ask questions about the massive historical shift in how Wall Street produced a new image of “markets” and crisis, one that helped determine how financial instability and social disruption were actualized and interpreted.

Investigating the logic that allowed investment bankers and corporate executives to break with the socially responsible ethos of the postwar American corporation, Ho discovers that Wall Street’s indifference to layoffs is shaped not only by its thirst for banking fees, but also by its own elite employees’ attitudes about work and the social good. “Despite their concerns over job insecurity,” she writes, “every Wall Streeter I talked to accepted the notion that working on Wall Street constitutes the more or less ‘equal exchange’ of risk for money.” They simply project their own work options onto the downsized employees that shareholder value extraction produces. In fact, Ho finds that investment bankers passionately believe that increasing shareholder value is good for everyone in the long run. As other notions of social responsibility disappeared, the merits of leverage and debt seemed irresistible to investment bankers, with the result that profitable and destructive mergers and acquisitions strategies appeared unavoidable, if not desirable. In the process, Ho discovers, an enabling “culture of smartness” — the very same meritocracy that Hayes wants to see reformed — is at the heart of the financial sector’s belief in the long con of shareholder value.

Then there is the relationship between investment banks and Ivy League colleges, which Ho describes as existing in a “meritocratic feedback loop.” In Liar’s Poker (2010), Michael Lewis offered an account of Wall Street recruitment: after graduating from Princeton in the 1980s with a B.A. in Art History and a pleasant demeanor, Lewis was recruited by Salomon Brothers to be a bond trader. Lewis is astonished by the culture of the Street, and by his ability to secure employment in a field about which he knows nothing. By the 1990s, when Ho was at Princeton as a graduate student, Wall Street firms had fully consolidated their grip on the id of the most ambitious of Ivy undergrads. Those who were admitted into the hallowed halls of Princeton and Harvard were impatient to take the next step into an even more exclusive and competitive club: the world of finance.

Ho, likewise, describes the relationship between Wall Street firms and Ivy League campus life as a “cross-pollination of elitism.” During a 1995 Goldman Sachs recruiting presentation at Princeton, she reports, a vice president and Wharton grad gushed, “‘Our analysts can go anywhere in the world […] We’ve got Hong Kong, we’ve got Sydney, we’ve got London […] You are all so smart!’” At Ivy League institutions, the undergraduates identify their success with extraordinary intellectual abilities: investment banking appears as the next step in a natural progression towards the top of the social/political/economic hierarchy. Ho’s network of informants was drawn from a circle of undergraduates at Stanford University, as well as colleagues and coworkers from Bankers Trust, many of whom are Asian-American and African-American. Her investigation of their perspectives on the working culture of Wall Street adds a further dimension to her work; many were sharply aware of racial discrimination on Wall Street, but their competitive drive continued to motivate them to excel at their jobs. At financial institutions like Goldman Sachs and Salomon Brothers, elitism is literally built in: Ho finds that, in most investment banking offices, elevators for recruits from the Ivy League do not even go to the floors where the support staff work. After the hard-sell recruitment process, when the young Ivy Leaguers enjoyed cash bars and endless schmoozing in plush hotel lobbies and fancy restaurants, small signs of their superiority keep them working punishing 70-hour work weeks. She describes investment banks as white collar sweatshops: car services and free dinners cushion junior bankers from the realities of work weeks against which turn of the century laborers rebelled. The young workers of the finance sector chase deals for their superiors — opportunities for corporate takeovers that are then “sold” to investors and other corporate clients. Novice investment bankers expect to be mistreated and highly rewarded at the same time. The more deals they can find and sell, the more fees they earn for their employers. Young investment bankers have no problems taking over healthy, profitable companies, downsizing payrolls and saddling them with crippling corporate debt. They do not want to keep making six figures and working long hours. They want to climb into the aerial redoubt of the one percent. The highly competitive culture insulates them from the bigger questions that their actions might pose to the more thoughtful among them. Investment bankers regard mass firings as perfectly normal; when a company they have taken over lays off thousands of workers, investment bankers imagine that this is the new face of employment for everyone: constant turmoil and turnover all in the name of market-driven efficiencies.

Ho’s own department at Bankers Trust is eventually dissolved, and she experiences firsthand the downsizing policies that she had set out to study. Her highly textured account of Wall Street as a work environment raises a specific set of economic and political questions about finance capital that more theoretical critiques of neoliberalism and the idealization of free markets have not been able to articulate. At the same time it offers a revealing look at the seduction of the “best and the brightest.” In the words of Kendra Lin, a pseudonym for a Harvard undergraduate interviewed by Ho after a Goldman Sachs recruiting event in 2000:

They’re this really elite investment bank that advises many leaders in corporate American on their mergers and acquisitions […] They make Harvard students feel like they are the cream of the crop […] I left his speech believing that Goldman is the Harvard of all investment banks.

The Goldman/Harvard conflation encapsulates the political, economic and cultural synergy between meritocracy and finance capital: Lin could not have predicted how unsavory the comparison would appear to readers in 2012, when it has become clear that those who are rejected by the standards of both institutions are consigned to suffer and accept the choices and the decisions of the “cream of the crop.”

Liquidated offers a portrait of Wall Street as home to an unstable industry that celebrates its own elitism while ceaselessly and restlessly overturning its own organizations and departments in order to churn out more profits and more images of its own power and global reach. She does not allow us to assume at any given moment that we know what free markets are, or how they work; rather, she argues that the market is constantly being invented and shaped by financial sector workers, who embody the ethos of creative destruction celebrated by the vanguard thinkers of finance capital and help create the instability, competition, and massive social disruption that characterize our age. It’s not that the wrong people have risen to the top, but that the drive to rise to the top is what keeps the wrong things happening, over and over again.

What is to be done? Hayes hopes that institutional innovation and reform will come out of the new politics and energy of Occupy Wall Street and the Tea Party movement. “The sense of living on a razor’s edge is, not surprisingly, most palpable in those areas of the country where economic loss is most acute,” he writes. He arrives in Berlin, New Hampshire, while following the 2008 John Edwards campaign. There he meets Murray Rogers, president of the local steelworkers union. Edwards was the only presidential candidate to have responded to the union’s invitation to visit their ailing town where the closing of steel mills has destroyed the livelihood of a generation of workers. It is a sad anecdote of jilted labor leaders and unreliable politicians. “Our elites and our institutions have proven themselves entirely incapable of addressing and forestalling the immiseration and destruction that now approach like a meteor,” Hayes writes.

Ho’s study, however, suggests an even more extreme conclusion: that our elites are not only incapable of reversing immiseration, they are incentivized to actively pursue it. Their highly profitable careers and brutal business practices propel the meteor that threatens to wipe the rest of us out; the question is not who gets these elite jobs and why, but whether they ought to exist at all. In either case, the financial industry needs serious reform if not massive reorganization. Will there be enough political and social will to make it happen? At the very least, we can be glad that economic life and its vicissitudes are occupying both academic and public discussion in new and urgent ways. These two books provide important parameters for those discussions.